2019 (5) TMI 2010 - AT - Income Tax

TDS u/s 195 - non deduction of TDS on export commission paid to non-resident agents for services rendered outside India - HELD THAT - There is no dispute that the assessee appointed commission agent outside India. AO failed to bring any material on record to show that the services provider has any business place in India or the services were not rendered outside India by those commission agents. The Hon ble Bombay High Court in CIT vs. Gujarat Reclaim and Rubber Products Ltd. 2015 (12) TMI 1078 - BOMBAY HIGH COURT held that commission earned by non-resident agent who carried on the business of selling Indian goods outside India cannot be said to have deemed to be income which has accrued or arise in India. Also decided in Toshoku Ltd. 1980 (8) TMI 2 - SUPREME COURT held that commission earned by non-resident who carried business of selling Indian goods outside India cannot be said to have deemed income which has accrued or arising in India. Decided against revenue.

Summary

Issues Involved:
The judgment involves appeals by the revenue under section 253 of the Income-tax Act against the order of the ld. CIT(A)-34, Mumbai for Assessment Year 2010-11 & 2011-12 regarding disallowance/addition under section 40(a)(i) of the Act.

Issue 1 - Disallowance of Export Commission Payment:
The revenue appealed against the deletion of addition made by the AO on export commission paid to non-resident agents under section 40(a)(i) of the Act, arguing that tax should have been deducted on these payments.

The AR of the assessee cited a decision of the Hon'ble Bombay High Court to support that commission paid to non-resident agents outside India for services rendered was not taxable in India. The DR for the revenue, however, supported the AO's order.

Upon review, it was found that the non-resident agents did not have a Permanent Establishment in India, and the services were rendered outside India. The CIT(A) deleted the addition, emphasizing that the payments were for procuring export orders from customers outside India and were in the nature of commission. The Tribunal affirmed the CIT(A)'s decision based on legal precedents and lack of contrary evidence.

Issue 2 - Assessment Year 2011-12:
The revenue raised identical grounds of appeal for Assessment Year 2011-12, which were similar to those for 2010-11. The Tribunal, considering the principle of consistency, dismissed the appeal for 2011-12 with similar observations as for the previous year.

In conclusion, both appeals by the revenue were dismissed based on the non-taxable nature of the commission payments to non-resident agents for services rendered outside India, as established by legal precedents and lack of evidence to the contrary.